Fracking in Arkansas depends on available energy resources, the location of these resources, applicable laws and regulations, politics, and the power of environmental and industry groups. Decisions by policymakers and citizens, including state and local governments and ballot initiatives, affect if and how fracking occurs in a state.

Fracking background

Hydraulic fracturing, or "fracking," is the process of injecting fluid--mostly water and sand, but with additional chemicals--into the ground at a high pressure to fracture shale rocks and release the oil and natural gas inside.

Recent technological advances in oil and gas drilling--horizontal drilling and hydraulic fracturing--have created a wealth of opportunities and challenges for states with fossil fuel reserves that can be accessed through the combination of these two technologies. The increased use of fracking has been an economic boon for many states, not only those with fracking, but also those with supporting industries, such as frac sand mining or associated machinery manufacturing.

Opponents of fracking argue that the potential negative environmental and human health impacts could be significant. Although wells have been fracked for over 65 years in the United States, concerns have been raised about whether federal, state and local regulatory agencies can keep up with the recent rapid increase in fracking activity, and adequately protect the environment and human health. As with any type of energy extraction, either traditional or renewable, there are economic, environmental and political trade-offs.

History

The first reports of oil and natural gas in Arkansas date to the 1860s. At this time, some coal companies built refineries to distill oil from lignite coal, but this proved unprofitable and efforts were soon abandoned. The Constantin Oil and Refining Company discovered a significant deposit of oil and natural gas in early 1920, marking the start of the state's oil boom. The boom ended by the late 1920s, but oil and natural gas production continued in the state. In 1939, the Arkansas Oil and Gas Commission formed to regulate the state's oil and natural gas industry.[3]

The Fayetteville Shale is one of the ten largest natural gas fields in the United States. Hydraulic fracturing is required to extract the gas contained in this field. Development of the Fayetteville Shale began in 2004.[4]

Economic impact

The use of fracking, often in combination with horizontal drilling, has made it possible to extract supplies of oil and natural gas that were once economically unfeasible to extract. This has led to significant growth in the domestic oil and gas industry, and in the supply of domestically produced oil and natural gas. The growth in activity has impacted the economy in direct ways, such as increased capital investments (from both the U.S. and other countries), royalty and lease payments, and government revenues in the form of fees and taxes. The increased supply of natural gas and oil has also affected electricity prices, manufacturing, service industries and employment. In many places, fracking has increased employment in the mining (oil and gas) sector and supporting industries, such as the restaurant and housing sectors. Consumers and manufacturers have also benefitted thus far from lower oil and natural gas prices, and increased demand for pipeline, drilling and other ancillary equipment. As demand for natural gas and oil grows, however, prices are expected to rise.[5]

Taxes, fees and revenue

Fracking booms can increase local government revenue through increases in property and sales taxes, which can help compensate for the costs detailed below. The primary revenue streams from fracking--mineral leasing revenues and severance taxes--go to state and federal governments. As of June 2013, Arkansas employed the following natural gas severance tax:

"1.5% for new discovery gas, 24 months from date of first production, 12-months from date of first production

Of the revenue collected from this tax 5 percent goes into the state general fund. The remaining 95 percent of revenues is distributed in accordance with the Arkansas Highway Distribution Law.[6]
Arkansas also has a oil excise tax of:

"4% of the market value when production averages 10 barrels or less per well per day

5% of the market value when production averages more than 10 barrels per well per day."

Of the revenue collected from this tax 3 percent goes into the general revenue fund. The remaining 97 percent is split between the state treasury fund (75 percent) and the county aid fund (25 percent).[6]
There is an oil and gas assessment tax in Arkansas that consists of:

"Up to 50 mills per barrel of crude oil or petroleum used or marketed

Up to 10 mills per MCF of natural gas produced and saved each month."

The revenue collected from this tax goes to cover the costs associated with "oil and gas conservation administration."[6]

Royalties and land sales

The United States is one of the few countries where property owners can own the right to use and build on their land, known as surface rights, but they may not own the rights to the minerals located under their property. Depending on the state the mineral rights may have been sold in the past and may now belong to someone other than the surface owner. In fact, those mineral rights may belong to more than one individual, a company, or many individuals, who now have the right to extract those minerals, and in some states this can happen without the permission of the property owner. This can cause tension between the mineral owner, or whoever is leasing the mineral rights, and property owner.[7]

The federal government doesn't collect data on oil and natural gas royalty and land sales on private land. A 2014 study attempted to estimate these figures and determined that Arkansas (among the lower 48 states) was ninth in private royalty income in the nation. The study also found that for 2010:

Economic impact studies

Below is a study about the economic impact of the oil and natural gas industry (also categorized as the mining industry in some studies) in Arkansas. Both the author(s) and sponsor(s) of the studies have been listed.

Study for the American Petroleum Institute

Economic modeling

IMPLAN and REMI are two econometric modeling systems used in both the private and public sectors to predict economic outcomes of policy changes. While these systems are widely used and highly respected, their results are theoretical and may not be universally accepted.

Click here for more information

IMPLAN, or the "IMpact analysis for PLANning," system came about in response to the Rural Development Act of 1972. It was designed as an economic impact modeling system under the direction of the USDA Forest Service and later in partnership with the University of Minnesota. It has been used since 1976 to predict the economic impact of many types of proposed policy changes. IMPLAN modeling is used by the Federal Reserve Bank, the U.S. Environmental Protection Agency and the Bureau of Economic Analysis.[10]

REMI, or Regional Economic Models, Inc., founded in 1980, models potential economic impacts of policy reforms in areas such as energy, environment, taxation, transportation and immigration. It is used by nonprofits such as the National Education Association, and state government agencies, such as the Florida Legislature.[11][12]

Because the oil and gas industry has grown so rapidly, there is not a wealth of data regarding its economic impacts. Instead, economists use forecasting models, such as IMPLAN and REMI, to predict the impact increased fossil fuel extraction is having on the economy. These studies usually measure both direct impacts, i.e., the jobs and income being added within the oil and gas industry and indirect impacts, i.e., jobs created throughout the supply chain. These studies also include induced impact, i.e., jobs created through increased spending due to growth in the industry.[13]

PricewaterhouseCoopers LLP (PwC), a research consulting firm, completed a study for the American Petroleum Institute about the economic impact of the oil and natural gas industry in 2011 in Arkansas. According to the PwC study, the oil and gas industry added $8.06 billion in total value in 2011, including direct, indirect and induced value. Of this $3.99 billion, or 3.9 percent of the state's total value added was direct, $2.05 billion was indirect and $2.03 billion was induced, totaling 7.8 percent of the state's total value in 2011.[13]

Employment

The PwC study attributes 92,549 jobs, or 5.9 percent of Arkansas' employment in 2011, to jobs created directly by, indirectly by, or induced from, the oil and natural gas industry. The industry directly employed 33,795 people, or 2.2 percent of state total employment. Indirectly the industry employed 27,146 people and induced 31,607 jobs.

Direct, indirect and induced labor income, according to this study, was $4.22 billion, totaling 6.3 percent of the Arkansas' labor income in 2011. Direct labor income from the mining sector was $1.69 billion, or 2.5 percent of the state's total. Indirect labor income totaled $1.36 billion and induced labor income was $1.18 billion.[13]

Environmental impact

Because of the sudden and unprecedented growth in fracking across the United States, getting high-quality, unbiased, state-specific information on the environmental impacts of fracking can be difficult. Most studies that would fit those first two qualifications are government studies that focus on the nation as a whole. As such, much of the information that follows in this section may only apply generally to the state. State-specific information has been added where possible.

Air

As with any type of energy extraction, there are several areas of risk when it comes to air quality. In the case of fracking, these risks include air pollutants such as volatile organic compounds (VOCs) and methane. Some environmental groups have raised concerns that methane could be leaked during the extraction process, resulting in unnecessary pollution.[14][15] Most of this pollution occurs during the well completion phase. Fracking operations can also emit known carcinogens, which have been linked with increased rates of cancer.[16]

Emissions

With regard to carbon dioxide, when natural gas is used to generate electricity in power plants, it produces fewer carbon emissions than coal-fired power plants. According to a 2014 study by the National Oceanic and Atmospheric Administration, "as a result of the increased use of natural gas, CO2 emissions from U.S. fossil-fuel power plants were 23% lower in 2012 than they would have been” without the increase in natural gas use.[17] During the extraction process, however, methane is emitted, and methane actually traps 20 times more carbon dioxide than other greenhouse gases. Nevertheless, according to the International Energy Agency (IEA), CO2 emissions in the United States dropped by 3.8 percent in 2012, due in large part to the "increased availability of natural gas, linked to the shale gas revolution."[18][17]

A 2014 report from the U.S. Environmental Protection Agency found a decrease of 3.3 percent in overall greenhouse gas emissions and a 12 percent decrease in methane emissions from 2011 to 2012. Natural gas extraction is the second largest producer of methane, after cattle.[15][19]

Earthquakes

An oil pump near Dumas City, Arkansas

The central and eastern United States have been experiencing an increased number of earthquakes over the last few years, according to the U.S. Geological Survey (USGS), the government agency responsible for such data. Studies from the USGS have not found fracking directly responsible for this increase in felt earthquakes; however, the USGS is looking into regulations that would use seismic data to determine thresholds dictating when and where fracking can occur.[20] There is a growing body of evidence suggesting that this growth in the number of earthquakes has been caused by the increased use of injection wells to dispose of fracking wastewater. While fracking has been rarely known to cause earthquakes, there is an established scientific link between earthquakes and the disposal of fluids in deep, underground injection wells. Once a well has been fracked, the water returned to the surface is called wastewater, and contains large amounts of salt and other contaminants.[21] Some of this water can be recycled, but that water which can't be recycled is often stored in injection wells. These injection wells are generally considered the safest and most cost-effective place for wastewater to be stored. Injection wells are located thousands of feet underground and are encased in cement. Multiple drilling wells often rely on one disposal well for wastewater storage. The U.S. Environmental Protection Agency estimates there are 144,000 of these wells across the United States receiving 2 billion gallons of frack fluid per day.[20][22]

Induced seismology, or man-made earthquakes, have been around for decades and can be caused by mining, damming rivers and injecting fluids into underground wells. Earthquakes are caused by injection wells when water pumped into underground wells causes the faults under the earth to slip. Even though scientists at the USGS have been able to cause earthquakes intentionally by carefully injecting liquid into the earth, the link between injection wells and earthquakes is not fully understood. One of the largest concerns for scientists and regulators is that they do not have the tools to predict whether wastewater will cause seismic activity. These concerns are compounded by the lack of knowledge about where faults are located across the central and eastern United States. The USGS is just beginning to map these areas in more detail in order to understand the seismic risks. As of June 2014, these earthquakes have typically been small, two or three in magnitude on the Richter scale, but at least one scientist has raised concerns that earthquakes could grow in intensity if old injection wells continue to be used for storage.[20][21]

Water

When it comes to water protection and fracking there are four main areas of risk: the depletion of fresh water sources, spills and leaks of fracking fluid into water, mismanaged produced water and flowback, and stormwater pollution. Stormwater, flowback, produced water and wastewater can be harmful because they contain total dissolved solids and naturally occurring radioactive materials. Because of the recent rapid growth in fracking, there are still many uncertainties about the effects of fracking on water. There are studies that link fracking to groundwater contamination, but they remain controversial. The U.S. Environmental Protection Agency is releasing a report in spring 2015 on the potential impacts of fracking on drinking water, and is working on effective programs for managing these potential risks.[16][23]

One of the main criticisms of fracking is that the process uses a disproportionately large amount of water. Up to 10 million gallons of fresh water may be required to frack one well. A 2014 study from the Bureau of Economic Geology at the University of Texas found, however, that the amount of water used in a traditional well, versus a hydraulically fractured well, is not appreciably different. According to one of the researchers, Dr. Bridget Scanlon, "The water used to produce oil using hydraulic fracturing is similar to the water used in the U.S. to produce oil using conventional techniques." The only difference between the amount of water used during the two oil or gas production techniques, is when in the process water is used. The study was funded by the Alfred P. Sloan Foundation.[24][25]

Health

Because of the recent, rapid growth of fracking, little is known about the potential impacts to human health. Government agencies dealing with human health issues have raised concerns about some chemicals that can be released during the fracking process, including VOCs. The Centers for Disease Control are working with the EPA and federal, state and local agencies to better understand potential impacts.[26][27]

Socioeconomic impact

Fracking can also present challenges to communities. Increased oil and natural gas production happens in boom or bust cycles, and often these cycles disproportionately occur in rural communities. Large scale fracking booms can also lead to increases in crime, such as substance abuse, sex trade and domestic abuse. An influx of oil and gas workers also strains housing and traffic resources. This lack of housing can push oil and gas workers into so-called 'man camps,' which are "clusters of mobile homes, RVs, and trucks," or into hotels. A fracking boom also puts heavy traffic on roads, which can strain infrastructure, increase traffic accidents, and increase the likelihood of oil spills. Local governments respond by hiring more police, social workers, health care workers and emergency response personnel, thereby spending more of their budgets on roads and social programs. Currently, much of the tax revenue generated by the oil and gas industry goes to the federal and state government, not the local governments.[16]

The Arkansas Oil and Gas Commission was established in 1939. Its stated mission is to "serve the public regarding oil and gas matters, prevent waste, encourage conservation, and protect the correlative rights of ownership associated with the production of oil, natural gas and brine, while protecting the environment during the production process." Specific responsibilities include issuing drilling permits, issuing authority for the operating and production of wells and conducting compliance inspections.[28]

The Arkansas Department of Environmental Quality is responsible for "preventing, controlling and abating pollution that could harm Arkansas's valuable natural resources." The department is composed of six regulatory divisions:[29][30]

Air Division

Hazardous Waste Division

Mining Division

Regulated Storage Tanks Division

Solid Waste Management Division

Water Division

Major organizations

Arkansas Independent Producers and Royalty Owners (AIPRO) is a non-profit organization and trade group representing the state's oil and natural gas producers and royalty owners. The organization is involved in lobbying activities. AIPRO is listed as a "cooperating association" by the Independent Petroleum Association of America, which is a national trade group that "advocates its members' views before the U.S. Congress, the Administration and federal agencies."[31][32][33]

ArkansasFracking.org is an anti-fracking group. Founded in 2011 by state residents Sam Lane, April Lane and Emily Lane, the group's mission is to "inform the public of the dangers of hydraulic fracturing ... we are working for a temporary moratorium on hydraulic fracturing in Arkansas until proper studies can be done, regulators are properly staffed and trained, and regulations are drastically changed to ensure safety for the public and the environment." The group is listed as a "coalition member" by Americans Against Fracking, which is a nationwide anti-fracking group.[34][35][36]

Natural gas use in Arkansas

In 2011, almost 36 percent of Arkansas's energy use went towards industrial purposes and one quarter was used for transportation. The rest was used mostly in residential and commercial buildings for heating, cooling, lighting and other functions. Most of the energy used in the state is in the form of coal (used primarily for electricity generation), followed by natural gas and petroleum.[2]

Natural gas is exported by several interstate pipelines and is mainly sent to Mississippi and Missouri through pipelines in Texas, Louisiana and Oklahoma. The interstate pipeline companies that move the gas from the production area to local utilities and through to other states include: ANR Pipeline Co., Centerpoint Energy Gas Transmission Co., Natural Gas Pipeline Co. of America, Mississippi River Transmission Corp., Texas Gas Transmission Co., Texas Eastern Transmission Corp. and Trunkline Gas Co. The Federal Energy Regulatory Commission regulates the rates they charge, the services they provide to the local distribution centers (LDCs) and the construction of new pipelines.[38][39]

**Note: Because the U.S. Energy Information Administration (EIA) does not include all of a state's energy production in these figures, the EIA totals do not equal 100 percent. Instead, we have generated our own percentages.

Arkansas has 41 gas and electric utilities. There are four investor-owned electric utilities and four companies that sell natural gas. Arkansas Public Service Commission regulates these utilities. There are also 15 municipal utilities that are not regulated by the commission.[41]

News items

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